The sweet notion that making a company environmentally friendly can
be not just cost-effective but profitable is going up in smoke. Meet
the man wielding the torch.

Auden Schendler learned about corporate environmentalism directly
from the prophet of the movement. In the late 1990s, Schendler was
working as a junior researcher at the Rocky Mountain Institute, a
think tank in Aspen led by Amory Lovins, legendary author of the
idea that by "going green," companies can increase profits while
saving the planet. As Lovins often told Schendler and others at the
institute, boosting energy efficiency and reducing harmful emissions
constitute not just a free lunch but "a lunch you're paid to eat."

Inspired by this marvelous promise, Schendler took a job in 1999 at
Aspen Skiing Co., becoming one of the first of a new breed: the
in-house "corporate sustainability" advocate. Eight years later, it
takes him six hours crisscrossing the Aspen region by car and foot
to show a visitor some of the ways he has helped the posh,
800-employee resort blunt its contribution to global warming.
Schendler, 37, a tanned and muscular mountain climber, clambers atop
a storage shed to point out sleek solar panels on an
employee-housing rooftop. He hikes down a stony slope for a view of
the resort's miniature power plant, fueled by the rushing waters of
a mountain creek. The company features its environmental credentials
in its marketing and has decorated its headquarters with green
trophies and plaques. Last year Time honored Schendler as a "Climate
Crusader" in an article accompanied by a half-page photo of the
jut-jawed executive standing amid snow-covered evergreens.

But at the end of this arid late-summer afternoon, Schendler is
feeling anything but triumphant. He pulls a company sedan to the
side of a dirt road and turns off the motor. "Who are we kidding?"
he says, finally. Despite all his exertions, the resort's
greenhouse-gas emissions continue to creep up year after year. More
vacationers mean larger lodgings burning more power. Warmer winters
require tons of additional artificial snow, another energy drain.
"I've succeeded in doing a lot of sexy projects yet utterly failed
in what I set out to do," Schendler says. "How do you really green
your company? It's almost f------ impossible."

Barely a day goes by without a prominent corporation loudly
announcing its latest green accomplishments: retailers retrofitting
stores to cut energy consumption, utilities developing pristine wind
power, major banks investing billions in clean energy. No matter
what Al Gore's critics might say, there's no denying that the Nobel
Prize winner's message has hit home. With rising consumer anxiety
over global warming, businesses want to show that they're part of
the solution, says Chris Hunter, a former energy manager at Johnson
& Johnson (JNJ ) who works for the environmental consulting firm
GreenOrder. "Ten years ago, companies would call up and say I need a
digital strategy.' Now, it's I need a green strategy.'"

Environmental stewardship has become a centerpiece of corporate
image-crafting. General Electric (GE ) says it is spending nearly
all of its multimillion-dollar corporate advertising budget on
"Ecomagination," its collection of environmentally friendly
products, even though they make up only 8% of the conglomerate's
sales. Yahoo! (YHOO ) and Google (GOOG ) have proclaimed that by
2008 their offices and computer centers will become "carbon
neutral." Fueling the public relations frenzy is the notion that
preserving the climate is better than cost-effective. But Schendler,
who only a few years ago considered himself a leading proponent of
this theory, now offers a searing refutation of the belief that
green corporate practices beget green of the pecuniary variety.

Empty Boasting

Charismatic and well-connected among environmental executives, he
has begun saying out loud what some whisper in private: Companies
continue to assess most green initiatives with the same
return-on-investment analysis they would use with any other capital
project. And while some environmental advances pay for themselves in
time, returns often aren't as swift or large as competing uses of
corporate cash. That leads to green projects quietly withering on
the vine. More important, and contrary to the alluring Lovins
thesis, many major initiatives simply aren't money-savers. They come
with daunting price tags that undercut the conviction that
environmental salvation can be had on the cheap.

Schendler explains his confessional mood as the result of cumulative
frustration: with foot-dragging colleagues, with himself for
compromising, and with the entire green movement frothily sweeping
through corporations in America and Europe. So far his candor hasn't
cost him his job, though rival resorts have groused about Schendler
to his bosses. His colleagues tolerate him with a combination of
personal affection and periodic annoyance. "We have a very
self-critical culture," says Mike Kaplan, Aspen Skiing's chief
executive. "We wouldn't have Auden any other way." The company,
Kaplan adds, has led its industry on the environmental front.

Schendler grits his teeth over the failure of modest proposals, such
as his plan last year to refurbish one of the resort's oldest lodges
to use less energy. He estimated the $100,000 project would have
paid for itself in seven years through lower utility bills. But the
money went for new ski lifts, snowmobiles, and other conventional
purchases. "The availability of capital is not infinite," says
Donald Schuster, vice-president for real estate.

Beaten back frequently, the environmental executive concedes that he
made a mistake last year when he pushed the resort to make audacious
green claims based on the purchase of "renewable energy credits."
RECs are a type of financial arrangement that companies increasingly
use to justify assertions that they have reduced their net
contribution to global warming. But the most commonly used RECs,
which are supposed to result in a third party's developing
pollution-free power, turn out to be highly dubious (BW-Mar. 26).
Aspen Skiing relied on RECs in declaring it had "offset 100% of our
electricity use." Schendler now concedes the boast was empty.

Aspen Skiing is far from alone in making suspect claims of green
virtue. Setting aside questionable renewable energy credits would
wipe out the climate-saving assertions of dozens of major
corporations celebrated for their environmental leadership. Office
products retailer Staples (SPLS ) has used RECs to turn a 19% spike
in emissions since 2001 into what it claims to be a 15% decline, the
company's sustainability reports show. PepsiCo (PEP ) and Whole
Foods Market have employed the credits to make declarations that
every bit of pollution from electricity they use is negated. Johnson
& Johnson has proclaimed a 17% reduction in carbon emissions since
1990, based largely on RECs. Without the credits, the pharmaceutical
giant has seen a 24% increase, J&J executives acknowledge. "Recent
corporate moves by J&J and others are pushing in the right
direction, but it is still window dressing compared to the problem
at hand," says Hunter, the former J&J manager.

Amid the overheated claims, some corporations have made legitimate
environmental gains. Wal-Mart Stores (WMT ) helped spark the market
for energy-saving fluorescent bulbs by giving them top billing, even
though incandescent bulbs are more profitable. Office Depot
overhauled lighting and energy in more than 600 stores, contributing
to the company's real 10% decline in releases of heat-trapping
gases. Dow Chemical (DOW ) and DuPont (DD ) have significantly
trimmed their actual emission levels. But there is still reason to
worry about long-term commitment. Dow says it invested $1 billion to
help achieve reductions of 19% between 1994 and 2005. Because of
technological challenges and costs, however, Dow predicts that
additional cuts won't occur until 2025, 18 years from now.

Much corporate environmentalism boils down to misleading statistics
and hype. To make real progress, genuine accomplishments will have
to be sorted out from feel-good gestures. Schendler no longer views
business as capable of the dramatic change he thought possible eight
years ago, the sort of change that corporations have grown
accustomed to boasting about. His own employer is "a perfect example
of why this won't work," he says. "We've had a chance to cherry-pick
50 projects and get them done. But even if every ski company could
do what we did, we'd still be nowhere."

Tre
TAuden Schendler felt nature's pull at the age of 14, when his uncle
took him on a backpacking trip through the rugged Bob Marshall
Wilderness in northwest Montana. Growing up in the scruffy New
Jersey city of Hackensack, he always felt cramped and out of place.
He escaped up the Atlantic coast to Maine, where he majored in
environmental studies at Bowdoin College. "I became the person I
wanted to be: a mountaineer, an outdoorsman." During this period he
scaled Alaska's 20,300-foot Mount McKinley and made several trips up
treacherous Mount Rainier in central Washington. On another
adventure, he trekked alone on skis for nine days across a wintry
Yosemite, sleeping in hand-carved snow caves. "I am at my happiest
on a fall morning, in a high-mountain campsite, maybe 12,000 feet,"
he says. "The air is crisp and chilly, and some coffee is brewing on
the campfire. What is better than that?"

After college he moved to Aspen and taught skiing and high school
math. The state of Colorado provided his first paid environmental
job, weatherizing the trailers of poor families to help them save
energy. This involved crawling beneath flimsy homes, where he
sometimes encountered the decomposing carcasses of raccoons. "It was
gritty work," he says, "the trench warfare of climate change."

In 1997, he took a job at the Rocky Mountain Institute (RMI) just
outside Aspen, which Lovins had co-founded 15 years earlier. Lovins,
a physicist by training, was collaborating with his then-wife, L.
Hunter Lovins, and businessman Paul Hawken on a book called Natural
Capitalism, which became a best-seller. By rethinking their
operations and choosing materials wisely, the book argued, companies
could produce far less pollution and earn more. "Auden is terrific,"
Lovins recalls of his "vigorous, smart, and dedicated" former
employee, who did research for Natural Capitalism. An obsession with
efficiency pervaded the institute: Schendler recalls being chastised
for boiling water in the kitchen without a lid on the kettle. He
idolized Lovins and went jogging with Hawken. "Instead of going to
graduate school, I went to RMI," he says.

He heard in 1999 that Aspen Skiing, a complex of hotels and ski runs
popular with wealthy vacationers, was looking for an environmental
director. The job seemed a perfect fit. "When I left RMI, I felt
that government was powerful but businesses were nimble enough and
motivated enough by profit to make changes that we need," he says.
"I was indoctrinated." The ski industry, which gorges on energy to
create a fantasy of always-plentiful powdered snow and cozy alpine
hideaways, offered an ideal place to put these abstractions into
practice.

Resistance from within

Aspen Skiing, privately owned by the Crown family of Chicago, which
made billions on its stake in military contractor General Dynamics
(GD ) and other enterprises, exudes an earnest concern about
nature-not least because its business would melt away if
temperatures rose just a few degrees. "My kids say: God, Dad, are we
going to ski when we're your age?'" says Kaplan, the CEO. "I have to
tell them: I don't know.'"

Then 29, Schendler received a genial welcome at Aspen Skiing's
wood-paneled headquarters near the county airport. "Auden came with
some great athletic credentials," recalls John Norton, then the
chief operating officer. "He's a terrific kayaker and skier, and
that's a guaranteed ice-breaker in a ski company." But when it came
to spending the company's money, things became complicated.

He first took aim at the 90-room Little Nell Hotel. The luxurious
lodge nestled at the base of Aspen Mountain devours so much
electricity that Schendler assumed it would be simple to find
efficiencies. He told its then-manager, Eric Calderon, he wanted to
put fluorescent lightbulbs in all guest rooms. The new bulbs would
last 10 times as long, use 75% less power, and pay for themselves in
only two years. The answer was no. Calderon, who favors dapper blue
blazers and chinos, worried that fluorescent light would suggest a
waiting-room ambience, jeopardizing the establishment's five-star
rating. "There's always a question of balance between environmental
concerns and satisfying expectations of the clientele," he says.

Thwarted on guest rooms, Schendler switched to Little Nell's
underground garage. Guests never saw it because valets park all
cars. For $20,000, Schendler said he could replace energy-gobbling
175-watt incandescent light fixtures with fluorescent bulbs and save
$10,000 a year. Unimpressed, Calderon again balked. If he had
$20,000 extra, he would rather spend it on items guests would
notice: fine Corinthian leather furniture or shiny new bathroom
fixtures.

At the company's next senior management meeting, Schendler brought
an unusual display to make his case for new garage lights. He had
wired a stationary bicycle to show how much less energy fluorescent
bulbs consume. Thirty managers watched as Schendler challenged a
burly executive to hop on the bike. Sure enough, it took much more
sweat to make several incandescent bulbs glow. But Schuster, the
real estate chief, didn't believe the new lights would save money.
"I was skeptical on the ROI [return on investment] calculations
Auden had presented for the retrofit," Schuster recalls. "One of my
concerns was that we were committing capital based on theoretical
returns without any real opportunity for a look back on the actual
returns."

It took Schendler two years to overcome resistance to the
garage-light replacement, and then only after he secured a $5,000
grant from a local nonprofit. He acknowledges the strangeness of a
corporation with annual revenue of about $200 million, according to
industry veterans (the company declines to provide a figure),
seeking charity to reduce its electricity use. With a hint of
sarcasm, he notes: "This is the sort of radical action that's needed
to get people over ROI thresholds."

When Break-even Won't Do

Larger-scale versions of his lightbulb struggle are playing out at
numerous other companies. Hailed as an environmental pioneer, FedEx
(FDX ) says on its Web site that it is "committed to the use of
innovations and technologies to minimize greenhouse gases." With
70,000 ground vehicles and 670 planes burning fuel, the world's
largest shipper is a huge producer of heat-trapping gases. Back in
2003, FedEx announced that it would soon begin deploying
clean-burning hybrid trucks at a rate of 3,000 a year, eventually
sparing the atmosphere 250,000 tons of greenhouse gases annually
from diesel-engine vehicles. "This program has the potential to
replace the company's 30,000 medium-duty trucks over the next 10
years," FedEx announced at the time. The U.S. Environmental
Protection Agency awarded the effort a Clean Air Excellence prize in
2004.

Four years later, FedEx has purchased fewer than 100 hybrid trucks,
or less than one-third of one percent of its fleet. At $70,000 and
up, the hybrids cost at least 75% more than conventional trucks,
although fuel savings should pay for the difference over the 10-year
lifespan of the vehicles. FedEx, which reported record profits of $2
billion for the fiscal year that ended May 31, decided that breaking
even over a decade wasn't the best use of company capital. "We do
have a fiduciary responsibility to our shareholders," says
environmental director Mitch Jackson. "We can't subsidize the
development of this technology for our competitors."

Schendler faces the return-on-investment challenge on almost every
proposal he makes. Earlier this year, he pushed his employer to
bankroll a $1 million solar-energy farm on the outskirts of Aspen.
Like most electricity consumers in the Rockies, Aspen Skiing's power
comes primarily from coal-fired plants, which emit large amounts of
carbon dioxide. With federal tax breaks aimed at encouraging clean
energy, the football-field-size solar array might generate a paltry
6.5% return, meaning it would pay for itself in 15 years. It barely
got approved, says Chief Financial Officer Matt Jones. "We put this
together with duct tape and chewing gum."

Schendler's persistence eventually won him admirers even among
executives who didn't agree with his entire agenda. "We were trying
to run a very complex set of businesses-four ski areas, three
hotels, two athletic complexes, and a golf course-but Auden never
let us forget that he belonged in the family portrait," says Norton,
the former COO and the man Schendler recruited for the bike-powered
lightbulb demonstration. "Usually he elbowed in with good humor, but
also sometimes with the grim single-mindedness that's the mantle of
a true believer."

'I was getting killed'

Schendler, who is married and has two young children, ranks below
top managers at Aspen Skiing but attends most of their important
meetings. The company zealously guards salary amounts, and he won't
reveal his, but a person familiar with Aspen Skiing estimates that
he earns about $100,000 a year. Perpetually on the move, Schendler
gets his hands into everything, fiddling with a boiler knob and
inquiring why a building's lights were on the previous night. He
sometimes seems self-conscious about his East Coast, elite-college
pedigree, compensating with gestures like helping rewire a lodge's
electrical circuits. Teasing follows him everywhere, he says. "I
can't tell you how many times I've heard, Hey, Auden, I recycled a
can today.'"

One of his proudest victories is the small hydro-power plant the
company spent $150,000 in 2003 to install on one of its ski slopes.
It's fed two months of the year by a stream that turns into a
roaring creek when the snow melts. The other 10 months it's dormant.
Inside the small hut containing the plant's steel turbine, he
animatedly describes the hurdles overcome during construction: "We
hit an underground gas line. I was over budget. I was getting
killed." But it got done.

For all his hard work, however, Schendler began to feel a creeping
disappointment. Combined, the hydro and solar projects eventually
will generate less than 1% of the company's power needs. His
colleagues felt they were stretching to accommodate him, but
Schendler knew he was coming up short. Seeking to make an
industry-leading gesture, he decided in 2005 to explore renewable
energy credits.

Introduced at the beginning of the decade, RECs are supposed to
marshal market forces behind wind and solar power. Developers of
clean energy sell RECs, usually measured in megawatt hours of
electricity, to buyers that want to counterbalance their pollution
by funding environmentally friendly power. But often the REC trade
seems like little more than the buying and selling of bragging
rights, rather than incentives that lead to the construction of wind
turbines or solar panels.

Schendler knew that RECs and similar financial transactions were
swiftly growing in popularity, as more companies sought green
credibility and REC brokers proliferated. He persuaded his superiors
in 2006 to spend $42,000 a year, a 2% premium on the company's
energy costs, to buy RECs at roughly $2 a megawatt hour. According
to commonly accepted REC principles, this investment, less than a
third of what it took to build the hydro plant, permitted Aspen
Skiing to claim that it had offset all of its use of coal-burning
energy.

Colleagues heaped praise on Schendler. In a press release, Pat
O'Donnell, then the company's CEO, said: "This purchase represents
our guiding principles in action." Accolades arrived from the EPA;
local newspapers reported the feat. "It was seen as one of my
biggest wins ever," Schendler says.

He spent hours thinking about how to describe the purchase of RECs
for marketing purposes. The formulation he came up with was that
Aspen Skiing had offset "100% of our electricity use with wind
energy credits, keeping a million pounds of pollution out of the
air." This wording was plastered on ski lifts, advertising
brochures, and countless company e-mails.

But even as he helped launch this campaign, Schendler had a queasy
feeling. At some level, he suspected the credits weren't causing any
new windmills to be built. They weren't literally offsetting
anything. He felt torn. "I'm well aware of what is right and what
works and what matters," he says. "I'm also aware of brand
positioning. Part of my job is to maintain [Aspen Skiing's]
leadership." His industry "was going to do this in a big way. One
small resort in California already had, and we needed to move. My
solace was the educational value of the move. The discussions it
would cause would be valuable, even if the RECs were not."

His prediction proved accurate. In the year and a half since his
RECs purchase, more than 50 other ski resorts have made similar
buys. No fewer than 28 claim to be "100% wind powered." Enticed by
inexpensive green claims, companies in other industries have been
equally enthusiastic. The top 25 REC purchasers have bought the
equivalent of 6 million megawatt hours this year, nearly quadruple
the volume from 2005, the EPA says.

Rather than enjoying his role as an REC pioneer, Schendler felt
increasingly anxious. In private, he pushed REC brokers for hard
evidence that new wind capacity was being built. Their evasiveness
gnawed at him. He asked veterans in the renewable energy field
whether his marketing message was legitimate. "They laughed at me,"
he says.

The trouble stems from the basic economics of RECs. Credits
purchased at $2 a megawatt hour, the price Aspen Skiing and many
other corporations pay, logically can't have much effect. Wind
developers receive about $51 per megawatt hour for the electricity
they sell to utilities. They get another $20 in federal tax breaks,
and the equivalent of up to $20 more in accelerated depreciation of
their capital equipment. Even many wind-power developers that stand
to profit from RECs concede that producers making $91 a megawatt
hour aren't going to expand production for another $2. "At this
price, they're not very meaningful for the developer," says John
Calaway, chief development officer for U.S. wind power at Babcock &
Brown, an investment bank that funds new wind projects. "It doesn't
support building something that wouldn't otherwise be built."

Bafflement and Irritation

Schendler isn't the only environmental executive aware of the
problem. In 2006, Johnson & Johnson spent $1 million on credits it
says are equivalent to 400,000 tons of emissions. Based on this
purchase, the company claimed to have shrunk its contribution to
global warming by 17% since 1990. The World Wildlife Fund and other
environmental groups have praised J&J, and the EPA gave the company
a Green Power award in 2006. Asked about the doubts surrounding
RECs, Dennis Canavan, the company's senior director of global
energy, concedes that the credits "aren't ideal." They don't really
reduce J&J's pollution, he says, and he hopes the company eventually
abandons them. Still, he insists that "somewhere along the line,
RECs do encourage new projects." He adds: "For the time being, this
is the system available to us to offset CO2."

However, some companies employ more direct methods, like building
substantial clean energy capacity themselves. In August, Jiminy Peak
Mountain Resort in Hancock, Mass., turned on a new wind turbine
standing 386 feet tall and capable of providing half of the resort's
electricity. The project took three years to complete and cost $4
million.

This spring Schendler concluded that he had to reverse course,
persuade his employer to back away from the renewable energy credits
he had endorsed just months earlier, and favor more meaningful green
projects. His colleagues reacted with bafflement and irritation.
"Auden, you are the most confusing human being I have ever
encountered," senior marketing manager Steve Metcalf wrote in an
e-mail in April. "You have placed on us the responsibility of
getting the environment message out-your message-as a company-wide
endeavor. We have responded to your bidding and environmental
passion with a gusto on the verge of maniacal. As mentioned, you are
confusing to the point of complete exhaustion."

Schendler replied: "Relax, brah. I enormously appreciate all the
support.... We're on the edge of this thing, figuring it out. If it
were simple and easy, someone would have done it already."

The Conflicted Critic

The company will continue to buy RECs through at least 2008, when
its current contract expires. Executives say they're reluctant to
stop any sooner, because they don't want to appear to be backsliding
on the environment when competitors claim to be entirely wind
powered. The company still touts its RECs purchases in some
marketing material.

Schendler, meanwhile, has become a prominent critic of RECs, a
potentially confusing role, since his employer buys them. In an
April letter to the Center for Resource Solutions, a nonprofit group
in San Francisco that certifies credits, he said that RECs have as
much effect on the development of new renewable-energy projects as
would trading "rocks, IOUs, or pinecones." That statement, which
inevitably whizzed around the Internet, stung some in the ski
industry who interpreted it as an attack. Schendler's immediate
boss, General Counsel Dave Bellack, has heard from competitors
asking that he stifle Schendler. Bellack has declined.

Now simultaneously an insider and an outsider in corporate
environmental circles, Schendler relishes the notoriety. "I don't
think I'm seen as a team player in this industry," he says, "but I
don't care. This issue is so much bigger than just the ski
industry." In March he told the U.S. House Subcommittee on Energy
and Mineral Resources that companies won't make serious progress
without regulation of carbon emissions-a departure from his earlier
faith that abundant, profitable green projects will transform the
way business operate.

His former mentor Lovins says Schendler could find further
cost-saving energy efficiencies with more support from his
superiors. But this mind-set, Schendler warns, could influence
companies to pursue exclusively projects with quick payoffs: "The
idea that green is fun, it's easy, and it's profitable is dangerous.
This is hard work. It's messy. It's not always profitable. And
companies have to get off the mark and start actually doing stuff."

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